TMI Blog2014 (8) TMI 630X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of application for settlement whose validity has to be decided under section 245D(2C) of the Act and cannot be postponed. Even if the application for settlement is declared to be valid in terms of section 245D(2C) of the Act, yet it would not estop/bar the Commission from rejecting the application for settlement at later date for non-disclosure of true and full information of the income or the manner in which income was derived. As the requirement of full and true disclosure of the income and the manner in which the income is derived is a requirement to be satisfied by the applicants at all times before the Commission. However, this by itself would not permit the Commission not to deal with the validity of the application at the stage of section 245D(2C) of the Act. Matter restored before the Commission to decide the validity of the applications for settlement dated January 31, 2013, filed by the applicants under section 245D(2C) of the Act after taking into consideration the report filed by the Commissioner (petitioner) under section 245D(2B) of the Act read with rule 6 of the Settlement Commission Procedure Rules - Decided in favor of revenue. - WP No.2135 of 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to submit her report under section 245D(2B) of the Act to the Commission on the applications for settlement filed by the applicants. (f) On March 25, 2013 (dated March 22, 2013), April 3, 2013, and April 4, 2013, the petitioner submitted her report under section 245D(2B) of the Act read with rule 6 of the Settlement Commission Procedure Rules, 1997 ( the Settlement Commission Procedure Rules ) objecting to the applications for settlement being entertained and praying that the applications for settlement be declared invalid under section 245D(2C) of the Act. This was on account of the petitioner's contention that there was a failure on the part of the applicants to make a full and true disclosure of its income and the manner in which such income has been derived in its applications for settlement to the Commission. In support of the above stand the petitioner had placed reliance upon the disclosure made during the search and seizure operation in January, 2011, for the period 2005-06 to 2011-12 to that declared in the applications for settlement. (g) On April 5, 2013, the applicants filed their reply to the petitioner's report made under section 245D(2B) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner on August 8, 2013, filed an application with the Commission seeking a direction that an order be passed under section 245D(3) of the Act directing investigation or alternatively verification on the issues raised in the applications for settlement. This was sought in view of the facts that in their confidential folder/annexures to the applications, no work-sheets have been given showing the manner in which the income was derived/computed. Thus, the petitioner pointed out investigation/verification, is necessary to enable it to offer comments in her report under rule 9 of the Settlement Commission Procedure Rules. (k) On August 12, 2013, the present petition was filed, challenging the impugned order dated April 8, 2013, passed under section 245D(2C) of the Act. (l) On August 14, 2013, the petitioner filed her report under rule 9 of the Settlement Commission Procedure Rules with the Commission. (m) On September 13, 2013, the petitioner sought an adjournment of the hearing under section 245D(4) of the Act by 45 days as she had filed this writ petition against the impugned order dated April 8, 2013, passed under section 245D(2C) of the Act. However, the Commission onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minimal. A precautionary step against possible misuse by evaders of the settlement machinery was thought of by the Wanchoo Committee which made the circumspect observation : However, we wish to emphasis that the Tribunal will proceed with the petition filed by a taxpayer only if the Department raised no objection to its being so entertained. We consider that this will be a salutary safeguard, because otherwise the Tribunal might become an escape route for taxevaders who have been caught and who are likely to be heavily penalized or prosecuted.' ('The Tribunal' in the Wanchoo Committee Report was re-christened 'the Settlement Commission' in the Act when it was passed by Parliament). The Commission was vested with full powers to investigate cases on its jurisdiction being invoked and to quantify the amount of tax, penalty and interest that it may eventually fix as payable. A strategic provision which held out fascination for the criminal taxevaders was contained in the report. The Wanchoo Committee recommended conferment on the Settlement Commission of a discretion to 'grant immunity from criminal prosecution in suitable cases'. The det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the period of 30 days of it being called by the Commission. Thereafter, under section 245D(2C) of the Act on the basis of the report of the Commissioner (petitioner) and after hearing the applicants and the Commissioner (petitioner), the Commission within a period of 15 days of the receipt of the report from the Commissioner (petitioner) is required to pass an order in writing declaring the applications for settlement as invalid and send a copy of the order to the applicants and the Commissioner (petitioner). However, when the applications is not declared invalid, then the Settlement Commission would proceed further in the matter in terms of section 245D(3) of the Act and may call for the records from the Commissioner (petitioner) and after the examination of the such records is of the view that further enquiry or investigation is necessary, it would direct the Commissioner (petitioner) to make such further enquiry or investigation and furnish a report on the matters covered by the application and any other matters relating to the case. In case the Commission does not direct any investigation and/or verification, then in that event, the Commissioner (petitioner) would file its repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sclosure of its income and the manner in which the income was derived in its application for settlement. This requirement/obligation of true and full disclosure is one of utmost good faith which begins from the time the application for settlement is made till the termination/ culmination of the proceedings before the Commission. In this case, the applicants failed to satisfy the above jurisdictional requirement to make full and true disclosure in its application for settlement. On this ground alone, the Commission ought not to have entertained the application for settlement at the stage of section 245D(1) of the Act proceedings or in any event declared it invalid at the stage of section 245D(2C) of the Act. In view of the above, it is submitted that this court declare the applications for settlement dated January 31, 2013, invalid in terms of section 245D(2C) of the Act. (b) Attention was drawn to the confidential folders/annexures to the applications for settlement of the applicants which were furnished to the petitioner post the impugned order dated April 8, 2013. (d) In the alternative, it is submitted that the impugned order dated April 8, 2013, of the Commission complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt under rule 9 of the Settlement Commission Procedure Rules. The entire application for settlement is now ripe for final hearing before the Commission. Thus, on this short ground alone, the petition be dismissed. (b) Alternatively, the conduct of the petitioner in these proceedings disentitles it to seek any relief from this court in its extraordinary writ jurisdiction. It is pointed out that consequent to the order dated April 8, 2013, the petitioner had access to the confidential portion/annexure to the settlement applications and also filed its report on the confidential portions under section 245D(3) of the Act read with rule 9 of the Settlement Commission Procedure Rules. It is submitted that if the reliefs prayed for are granted to the petitioner, information disclosed in the confidential reports would be used in the assessment proceedings before the authorities under the Act. The petitioner would otherwise not have had access to the confidential portion of the applications for settlement of income. The applications were declared to be valid under section 245D(2C) of the Act by the Commission on April 8, 2013, and the petitioner, thereafter, participated in the proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the above case, the Commission did not record its satisfaction with regard to the validity and/or invalidity of the application under section 245D(2C) of the Act. While in the present proceeding the Commission in its impugned order dated April 8, 2013, has recorded its satisfaction that the application is not invalid. Thus, the decision of the Division Bench of this court is inapplicable. (e) It is submitted that on identical facts the Delhi High Court in the matter of CIT v. ITSC [2014] 360 ITR 407 (Delhi) ;has held that the order under section 245D(2C) is not a final order and is always subject to order that may be passed at the final hearing under section 245D(4) of the Act. Consequently, whether or not the applicant has made a full and true disclosure of its income and also manner in which the income has been derived could be considered before the order of settlement is passed under section 245D(4) of the Act. The Delhi High Court has rendered its decision by following the order of the apex court in the matters of Ajmera Housing Corporation v. CIT [2010] 326 ITR 642 (SC) and CIT v. K. Jayaprakash Narayanan [2009] 184 Taxman 85 (SC). Thus, the decision of the Delhi Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This is a condition precedent for the purpose of an applicant invoking the jurisdiction of the Commission and also for the Commission to act further on the application for settlement. It is the case of the petitioner that the aforesaid jurisdictional requirement of true and fair disclosure by the applicants has not been considered in the impugned order dated April 8, 2013, under section 245D(2C) of the Act but the Commission has merely postponed its decision on the same. Once it is held that the issue of true and full disclosure in the application for settlement is a jurisdictional issue and in the absence of its satisfaction jurisdiction cannot be exercised by the Commission, it follows that mere participation in the proceeding by the parties cannot by itself bestow the jurisdiction on the Commission. The exercise of jurisdiction by an authority when not so vested in it is open to challenge and participation in the proceeding will not confer any jurisdiction as held by the apex court in Carona Ltd. v. Parvathy Swaminathan and Sons [2007] 8 SCC 559 and Kanwar Singh Sainy v. High Court of Delhi [2012] 4 SCC 360. The next preliminary contention urged on behalf of the applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial folders) and evidence which has been produced and/or recorded by the Commission in the course of proceedings could be used by the Assessing Officer or the income-tax authority in the proceedings before it as if the same has been recorded by him in the course of the proceedings before him. Thus, it is not correct to conclude that by participating further in the proceedings before the Commission and due to delay in filing of the petition, the petitioner has obtained any undue benefit which it would not have obtained in the absence of delay in filing the petition. Therefore, we find no substance in the above objection of the applicants. It was next contended by the applicants that the petitioner can have no grievance with the impugned order dated April 8, 2013, as it has merely postponed the decision on the applications for settlement satisfying the pre condition of true and fair disclosure to the stage of section 245D(4) of the Act, i.e., at the time when the petitioner are in possession of the confidential folders/annexures to the application from the Commission. This, according to the applicants, is in line with the petitioner's report dated March 22, 2013 (filed on Mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of section 245D(2C) of the Act would amount to the Commission abdicating its mandatory obligation under the Act. However, it was clarified by the Division Bench of this court in the above case that the requirement of true and full disclosure is a continuous requirement and order of validity at the stage of section 245D(2C) of the Act would not estop/prevent the Commission at later stage of the proceedings to reject the application on account of failure to make full and true disclosure of the income and the manner in which it is derived to the Commission. The applicants, on the other hand, contended that the decision rendered by the Division Bench of this court in CIT v. ITSC (No. 1) Writ Petition No. 3900 of 2013 [2014] 365 ITR 68 (Bom) is completely distinguishable from the facts of the present case. The distinction that is being raised by the applicants in the present case is that the Commission has declared in the impugned order that the application for settlement filed by the applicants is not invalid while in the Division Bench decision of this court in CIT v. ITSC (No. 1) Writ Petition No. 3900 of 2013-since reported in [2014] 365 ITR 68 (Bom) no such finding/declaration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income and the manner in which it is derived which is the basis of the validity of the applications would be considered later. The applicants have while contending before us that the facts in the present case are distinguishable from the facts before the Division Bench of this court in CIT v. ITSC (No. 1) Writ Petition No. 3900 of 2013-since reported in [2014] 365 ITR 68 (Bom) and would be appropriately be covered by the decision of the Delhi High Court in the matter of CIT v. ITSC [2013] 217 Taxman 39 (Delhi) ; [2014] 360 ITR 407 (Delhi) In view of our finding in paragraphs 14 and 16 above, that the present case stands covered by the order of the Division Bench of this court in CIT v. ITSC (No. 1) Writ Petition 3900 of 2013-since reported in [2014] 365 ITR 68 (Bom) we need not consider the above submissions. However, as the submission were advanced on the above issue at some length, we are dealing with the same. The Delhi High Court in CIT v. ITSC [2013] 217 Taxman 39 (Delhi) ; [2014] 360 ITR 407 (Delhi) has held that the issue of full and true disclosure on the part of the applicants before the Settlement Commission is not finally decided while considering the applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where it is possible by order either reject the application or allow the application to be proceeded with. While the post-2007 amendment at the stage of section 245D(1) of the Act, the Commissioner (petitioner) is not heard by the Commission nor any report received from the Commissioner but an ex parte hearing is granted only to the applicants and it is in the nature of the Commission accepting the settlement application. In the post-2007 amendment regime, in terms of section 245D(2C) of the Act, the Commission is required to consider the report of the Commissioner (petitioner) and it is obligatory upon the Commission to declare in writing the validity of the application for settlement. There is no option the post-2007 amendment to defer the consideration of validity of the application because it is not possible as was the case prior to the 2007 amendment by the specific use of the words if possible therein. Therefore, we find that there is a statutory change consciously made by Parliament in 2007 in Chapter XIX-A of the Act in respect of application for settlement whose validity has to be decided under section 245D(2C) of the Act and cannot be postponed. Therefore, the reliance up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, yet it would not estop/bar the Commission from rejecting the application for settlement at later date for non-disclosure of true and full information of the income or the manner in which income was derived. As the requirement of full and true disclosure of the income and the manner in which the income is derived is a requirement to be satisfied by the applicants at all times before the Commission. However, this by itself would not permit the Commission not to deal with the validity of the application at the stage of section 245D(2C) of the Act. In the present case, the Commission has postponed considering the validity of the applications to the final hearing stage, namely, section 245D(4) of the Act. The Commission being a creature of Chapter XIX-A of the Act is bound by the mandate of section 245D(2C) of the Act and cannot render a statutory provision redundant. In fact, no authority under the Act can ignore the statutory provisions so long as it is found in the statute. In view of the above, we quash and set aside the impugned order dated April 8, 2013, of the Commission and grant the alternative prayer by restoring the applications for settlement to the Commission to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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